• Setting up of cold chain facilities
• Development of infrastructure facilities in notified industrial parks
• Construction of hotels of two-star or above category
• Development of inland container depots
• Development of multi-modal logistics parks
• Development of Agri-processing units
• Development of renewable energy projects
• Development of electronic manufacturing clusters
• Development of manufacturing facilities in notified special economic zones

The expenditure that is eligible for deduction under Section 35AD of Income Tax Act includes:

• Expenditure incurred on the purchase of machinery and plant
• Expenditure incurred on civil construction works
• Expenditure incurred on the purchase of land
• Expenditure incurred on professional fees
• Expenditure incurred on interest on loans

Case laws

The amount of deduction that the company can claim under section 35AD of Income Tax Act is 100% of the capital expenditure, i.e., Rs. 100 lakhs. This deduction will be allowed in the financial year 2023-2024, i.e., the year in which the expenditure is incurred.

The company will not be able to claim any depreciation on the capital expenditure incurred under section 35AD of Income Tax Act. However, if the company sells the asset after the deduction has been claimed, any capital gain arising on the sale will be taxable.

The loss from the specified business covered under section 35AD of Income Tax Act cannot be set off against any other income except income from specified business. The loss can be carried forward for a maximum of eight years and can be set off against the profits of the specified business in the subsequent years.

FAQ Questions

• What is Section 35AD of Income Tax Act?

Section 35AD of the Income Tax Act, 1961 allows a deduction of 100% of the capital expenditure incurred wholly and exclusively for the purposes of any specified business carried on by the assessed during the previous year in which such expenditure is incurred by him.

• What are the specified businesses under Income Tax Act?

The specified businesses under Section 35AD of Income Tax Act are:

* Setting up and operating a cold chain facility for storage of perishable agricultural produce.

* Setting up and operating a warehousing facility for storage of agricultural produce.

* Setting up and operating a facility for the generation and distribution of electricity from renewable sources.

* Setting up and operating a facility for the treatment and disposal of hazardous waste.

* Setting up and operating a facility for the manufacture of electric vehicles or hybrid vehicles.

• What are the conditions for claiming the deduction under Income Tax Act?

The following conditions must be met in order to claim the deduction under Section 35AD of Income Tax Act:

* The expenditure must be incurred wholly and exclusively for the purposes of the specified business.

* The expenditure must be capital expenditure.

* The expenditure must be incurred during the previous year in which the business is commenced.

* The expenditure must be capitalized in the books of account of the assessed on the date of commencement of the business.

• Can loss from a specified business be set off against other income under Income Tax Act?

No, loss from a specified business cannot be set off against any other income except income from another specified business.

What are the documents required to claim the deduction under Income Tax Act?

The following documents are required to claim the deduction under Section 35AD of Income Tax Act:

* Proof of expenditure incurred.

* Books of account of the assesses.

* Certificate from a chartered accountant verifying the expenditure incurred.